Air Passenger Duty

[compton3bravo]

Just a heads-up everybody to say that the dreaded Air Passenger Duty (APD) - which is one of the highest in the world - is set to rise as of 1 April this year and again on 1 April 2014 in line with the RPI (Retail Price Inflation). I see the four major UK and irish airlines - British Airways, easyJet, Ryanair and Virgin have called on the Chancellor to do something about reducing it but it has again fallen on deaf ears.

[Barling Magna]

"There Is No Alternative" Tina Osborne........

[Buster the Bear]

Only rising on flights of 2000 miles plus.

[Betablockeruk]

UK PLC is closed. Please take your business and tourism elsewhere.

A Fair Tax On Flying

An actual follows.

Ouch.

[jabird]

The big difference between the bulk of the UK and countries mentioned on the "Fair Tax" website is that we are not physically joined to the main continental land mass.

When the Dutch had higher flight taxes, NRN filled with Netherlands numberplates. If Denmark put their taxes up noticeably above Sweden, people pay the toll to cross the Oresund and use MMX.

Now of course there is some seepage to DUB (esp from BFS as discussed via the UA EWR service), and some people take Eurostar (no APD), ferries or a short hop (lower APD) to CDG and AMS. What percentage of the market in total do this? 1%? 2%?

I don't accept the argument that getting rid of APD would be "zero cost to the treasury" - and I've yet to read a convincing argument to say so. Frankly, complaining about the cost of a family trip to Florida having the APD component go from £40 to £260 is the LAST thing that is going to get the Treasury to yield, as slashing this tax is just going to make it easier for families to fill their suitcases in the Orlando malls, thus dodging VAT as well as not paying APD.

I somewhat doubt APD could take much more for long haul flights, but I really can't see it being repealed on shorter legs. APD might be labelled as a green tax with the intention of changing behaviour, but the reality is that it is an easy-to-milk cash cow as there are few alternatives for most European destinations. If the industry wants it changed, they need to come up with something fairer, and stop pretending it is going to be cancelled.

[Capetonian]

This shambolic and shameful excuse for a government seems determined to destroy the competitiveness of the UK's travel industry, airports, and airlines. It might be different if the national carrier were state owned and they had their snouts in that particular trough.

[Granite City Express]

jabird,

I don't accept the argument that getting rid of APD would be "zero cost to the treasury" - and I've yet to read a convincing argument to say so. Frankly, complaining about the cost of a family trip to Florida having the APD component go from £40 to £260 is the LAST thing that is going to get the Treasury to yield, as slashing this tax is just going to make it easier for families to fill their suitcases in the Orlando malls, thus dodging VAT as well as not paying APD.

The Dutch government produced a document that showed that they raised 350m euros in APD but lost more than a BILLION euros in tourism and business revenue. That was their primary driver for scrapping their airport tax.

The family trip to Disneyworld is not what is damaging the UK economy. It is the lost business because it costs less to send staff through Dublin, Schiphol or Frankfurt that is the real killer. It never appears on the bottom line of a spreadsheet because it never arrives in the UK economy. When a country's economy relies on tourism (9% of the Scottish economy is tourism based) then the lost revenue due to APD has a real and damaging effect on small businesses in rural areas.

it is worth having a read through this...
http://corporate.easyjet.com/~/media...y-Abridged.pdf

[Dannyboy39]

The industry is an easy target. Joe Public isn't interested in the long term interest of the industry; all they care about is getting their low cost flight to Tenerife or Malaga every summer. They are the vote winners.

Certainly a contradiction in Gideon's terms, that he wants the country to be the most competitive nation in the world for business and tax.

The UK now has the 2nd WORST tax in the world for flying - only Chad is worse. Out of 150 countries.

[j636]

Now of course there is some seepage to DUB (esp from BFS as discussed via the UA EWR service), and some people take Eurostar (no APD), ferries or a short hop (lower APD) to CDG and AMS. What percentage of the market in total do this? 1%? 2%?

Not anymore as APD was dropped from Belfast or reduced in line with ROI. If there is still people using DUB its by choice and TBH I can't blame them if its BFS or DUB as a choice.

[ESCNI]

APD was only dropped from the intercontinental (Newark) route.

It still applies to every other route.

[jabird]

This shambolic and shameful excuse for a government seems determined to destroy the competitiveness of the UK's travel industry, airports, and airlines. It might be different if the national carrier were state owned and they had their snouts in that particular trough.

Well Ken Clarke brought it in, the last lot halved it then doubled it back, and introduced add-ons for long haul and premium cabins. The coalition are just continuing where Labour left off, and to quote Lord Adonis (on Heathrow, but same issue) - the Lib Dems would have doubled it again, so the tail is wagging the dog. If you are lucky, you will get a crowd pleasing peg back to £10 for short haul in the next budget, but APD isn't going to be scrapped.

The Dutch government produced a document that showed that they raised 350m euros in APD but lost more than a BILLION euros in tourism and business revenue. That was their primary driver for scrapping their airport tax.

Like I said above, Dutch APD at UK levels fills the car parks at NRN, DUS, CRL, LUX, BRU and so on. Show me that more than 1-2% of ex UK traffic is hopping to other hubs for onward travel, then you have a strong case for cutting back on the long haul APD. In the meantime, the cost and hassle of getting to these continental hubs still outweighs the savings on the ticket for most people, most of the time.

It is the lost business because it costs less to send staff through Dublin, Schiphol or Frankfurt that is the real killer.

If pax are routed LHR-AMS-ORD instead of LHR-ORD direct, the APD is the same, but the fare is cheaper. That's down to the natural market value of a direct routing, and has been this way for decades. Likewise, an AMS-LHR-ORD routing will often be cheaper than AMS-ORD direct.

When a country's economy relies on tourism (9% of the Scottish economy is tourism based) then the lost revenue due to APD has a real and damaging effect on small businesses in rural areas.

Agreed. Now passenger flows might not quite subscribe to Newton's laws, but as you can't impose a tax that only applies to Scots going away on holiday, you have to accept that the UK as a whole still has a tourism deficit.

I read the PWC report when it came out, and it made some good points, but it did not address this imbalance. Even if you argue that each £1 of APD has more impact on the tourist coming in than it does on the Brit going away, the sun still shines brighter on the costas, and that isn't changing soon.

Now as for the anomaly of domestic APD, I'd love to hear a way to solve that one. Why should passengers of any kind be taxed twice to make what is usually a relatively short journey (compared with, Istanbul for example, which is taxed at same rate).

The EU wouldn't just let you scrap it, but could you halve it on grounds most people are coming back the same way, so they'll pay the same in total? The status quohere is surely as damaging to UK tourism and business as anything else?

Certainly a contradiction in Gideon's terms, that he wants the country to be the most competitive nation in the world for business and tax.

Yes, but we were also promised the "greenest government ever". This is a dirty industry, and you still have the likes of FoE chomping for bigger rises in APD. We know APD is a "blunt instrument", but other suggestions, such as taxing the aircraft (therefore encouraging better seat occupancy), have not materialised. Even though LH APD covers the carbon cost about 5 times over, there are still other local environmental issues with airports, and as there neither is nor can be VAT on international airline tickets, HMRC still want to get their cash somehow.

Not anymore as APD was dropped from Belfast or reduced in line with ROI. If there is still people using DUB its by choice and TBH I can't blame them if its BFS or DUB as a choice.

I referenced what is effectively the "United exemption" as the tax was abolished primarily to preserve traffic on that one route, which (then) Continental wanted to axe.

The waiver only applies to direct long haul routes, so if you route to NYC with BA via LHR, you pay the higher rate. As DUB has a far greater range of both SH and LH routes, it is only natural for people to use it as an alternative, for the double advantage of lower taxes and a better route network.

[Granite City Express]

Like I said above, Dutch APD at UK levels fills the car parks at NRN, DUS, CRL, LUX, BRU and so on

you are missing the point. Why have a tax that raises 350 million if it creates a loss of a billion in other areas of the economy? The Dutch recognised it and quickly killed the tax. This isn't about VFR or holiday traffic; this is about business traffic.

I know of two companies that have relocated to mainland Europe because the increase in the travel budget was significant and a number of other companies have scaled back their operations here and moved departments to Dublin, Amsterdam and Brussels. This tax is costing people their jobs in the UK.

APD is not a green tax, it is just a gouge. If the government wants to level the playing field put a similar tax on ferry pax long distance coach pax and all cross country rail pax, also stop any government subsides on railways, then it starts becoming fair.

the sun still shines brighter on the costas, and that isn't changing soon.

exactly! So why make it even more difficult to attract tourists to a damp driech Scottish summer? Tourism is important to many parts of the UK economy and should be protected - not damaged by a shortsighted punitive tax that causes a net loss compared to what it generates in income.

[jabird]

you are missing the point. Why have a tax that raises 350 million if it creates a loss of a billion in other areas of the economy? The Dutch recognised it and quickly killed the tax. This isn't about VFR or holiday traffic; this is about business traffic.

I'm not missing any point, I'm saying the Dutch experience is not directly relevant to the UK.

Unless you are proposing that Aberdonians unhappy with high APD will be filling the car parks of SVG?

Like it or not, there is sea separating us from the rest of Europe, so the arguments to reduce the tax do not work as well here. Of course it hurts domestic tourism, but it also earns from the far larger outbound market. As I said before, I've yet to see any convincing evidence that UK APD is costing us more than it brings in, and the PWC report was no different.

[Fairdealfrank]

Quote: "Like I said above, Dutch APD at UK levels fills the car parks at NRN, DUS, CRL, LUX, BRU and so on."

That doesn't explain why Ireland reduced its equivelant of APD to a low flat rate of Eu 3.00 (£2.40). In that rspect, Ireland doesn't share a land border with country levying lower rates of APD or no APD: it only has the UK with much higher rates.

The "damage to the economy in general, to tourism (outward and inward), to inward investment, etc." arguments are more convincing.

[Granite City Express]

I'm not missing any point, I'm saying the Dutch experience is not directly relevant to the UK.

you are missing the point completely. I cant make it any simpler for you. The tax raised 350m. The damage it did to the rest of the economy was over a billion. Net result a loss of 650m.

[PAXboy]

If the govt starts taxing people going cruising on those whacking great palaces that weigh over 100,000 tonnes (the two largest of Royal Carribbean International weigh 225,282 tonnes) - then I'll believe that it's a green tax.

[Bagso]

Pretty much halted long haul growth in its tracks at Manchester.....

We now have a farcical situation where there are 12 flights a day from Dublin to the US, if you are savvy you will buy a ticket Dublin - Man and a separate ticket Dub - USA...........

The transfer time is more than made up by the savings using US preclearance.

A number of these flights should have been coming to Manchester but it is now so uncompetitive airlines are looking elsewhere.

The irony is APD was introduced as a "green tax", in the case of Manchester it is simply diverting pax to connect via Eire and EEC where APD has been scrapped....

"doubling the number of flights".

[jabird]

That doesn't explain why Ireland reduced its equivelant of APD to a low flat rate of Eu 3.00 (£2.40)

I remember MOL lobbying for this and promising a whole load of new routes, which iirc didn't quite happen. Without being party to the Irish govt's logic or their inbound/outbound tourism stats, can only suggest they saw an economic advantage which UK govt doesn't see. How strong is the (not literally) green lobby in Ireland? How much lobbying from SNN, an airport with a route network well beyond what would usually be expected of a place that size?

The tax raised 350m. The damage it did to the rest of the economy was over a billion. Net result a loss of 650m.

Let's say the tax was expected to raise 1bn, but they found more people used non-Dutch airports than expected, resulting in a lower tax take?

If the govt starts taxing people going cruising on those whacking great palaces that weigh over 100,000 tonnes (the two largest of Royal Carribbean International weigh 225,282 tonnes) - then I'll believe that it's a green tax

Huge tonnage moving very slowly, but certainly not enhancing business links and almost entirely exporting currency. However, I'd be a bit worried about the UK government trying to tax its citizens on an activity which usually takes place entirely outside its borders. Then they'd go for foreign car hire, then we'd be ending up no better off than the Cypriots.

However, government does have the right to tax flights leaving the UK, and has chosen to tax the longer distance ones more. Now is this really about the environment, or is it because APD is effectively a sales tax, so the longer / more luxurious flights get taxed higher?

The transfer time is more than made up by the savings using US preclearance.

Hardly. If you want "safety" of a through ticket, needs a 24 hour layover in order to only be liable at European rate. If you book separate contract, segment A has no liability for delay on segment B, even if A+B are same carrier. Going via DUB, a lot of the effective "feed" is with Ryanair - mostly reliable, but if anything goes wrong, you are well and truly stuffed.

The irony is APD was introduced as a "green tax", in the case of Manchester it is simply diverting pax to connect via Eire and EEC where APD has been scrapped....

If this was the majority of users, then yes, that would be counterproductive. I put it to you it is about 1-2% of actual journeys. I have tried it both ways, and in the end, I found I saved no money taking hop&skip route, but I did get to see a great deal more!

Now you can get insurance to cover these connections, but you will either find a heavily loaded premium, or clauses about much longer minimum connections than a through ticket will give you. So going back to the scenario of the Lib Dems wanting to DOUBLE long haul APD - that is where I think hop&skip would become the norm, and then it would be seriously counter-productive.

In the meantime, I know the industry hates APD, but as there is no VAT on flights, and no duty on fuel either, I don't see any it being repealed, or even reduced beyond a token equivalent of 1p in the pint any time soon.

[Trossie]

There is absolutely no way that APD is a 'green' tax: It is simply aviation highway robbery that is perpetuated and promoted by the 'greenies/lefties' who have absolutely no understanding of the industry but in their mean and nasty way want to punish something that they perceive as 'elitist'.

I have known people to take to the roads on their own in an old and inefficient 'banger' rather than take a domestic flight for the same journey because the addition of APD to the ticket price made driving more attractive. That aeroplane therefore departed with an empty seat while an extra car was on the roads. The can be absolutely no 'green' justification of APD there! But the 'greenies/lefties' will be feeling smug about the idea that they stopped someone travelling by air. (And just to confound the 'no duty on airline fuel' brigade, that domestic flight paid full VAT on the fuel used in addition to the APD charged.)

For anyone taking a long-haul flight from much north of the Watford Gap, they will have to include the costs of travel down to either LHR or LGW (or even worse in future: right across London to Kent if that brainless 'Boris island' idea ever gets taken seriously!) plus probably the cost of a night in an airport hotel. Why not take a low-cost flight to AMS, spend a night in an airport hotel there and fly away without having had to shell out a fortune in ADP highway robbery?

And if you are connecting from say Canada to India, avoid Britain entirely and connect through the likes of AMS or BRU to avoid the APD highway robbery. (Or better still, avoid Europe entirely by connecting through the Middle East and avoid the extra costs of the EU's farcical 'emissions trading' scheme -- that's a nonsense politically induced 'commodities trading' scam if there ever was one!)

British jobs and a valuable British industry? Nah. No need to worry about them. The 'greenies/lefties' will be feeling all smug about the fact that they have helped crush one of those bastions of 'elitism', without having the brains to realise that they are killing off the very progress that has moved us away from relying on coal-fired steam engines for our transport, or even further back, having the roads covered with horse dung.

There is no common sense justification of APD other than yet another way of stealing people's hard earned money from them in order to support bloated public sector 'jobs' (or buy duck houses for MPs' ducks!).

[Granite City Express]

Let's say the tax was expected to raise 1bn, but they found more people used non-Dutch airports than expected, resulting in a lower tax take?

This just is not getting through to you is it?

They raised the target revenue. They found, because the Dutch like to know these things, that the rest of the economy suffered because of it.

Initial Ministry of Finance estimates had predicted some €350 million annually in tax revenues to be generated. A later Government study estimated that the tax had cost the Dutch economy some €1.3 billion in lost revenue.

In the meantime, I know the industry hates APD, but as there is no VAT on flights, and no duty on fuel either, I don't see any it being repealed, or even reduced beyond a token equivalent of 1p in the pint any time soon.

Remind me again how much VAT is charged to ferry, rail and bus passengers? How much duty do rail and ferry operators pay on their fuel? How much tax does a Eurostar passenger pay on their journey from London to Brussels and then compare it with the amount of tax an airline passenger pays on exactly the same journey.
How much subsidy does a rail operator get? I can guarantee it is a damned sight more than any airline would ever even dream of getting.

The only place where this tax may have a beneficial effect is Heathrow, in order to reduce the max capacity situation there, but for anywhere else in the UK it is destroying the airline industry.
Article from the Telegraph